Cummins Lowers Full Year Revenue Outlook, Plans Job Cuts; Shares Fall

10/9/2012 6:43 PM ET

Cummins Inc. (CMI) Tuesday once again lowered its full-year 2012 revenue outlook, due mostly to the prevailing weakness in the global economy. The diesel engine maker also plans to shut down some manufacturing facilities and expects to cut up to 1500 jobs to curb expenses. Following the news, shares of Cummins dropped five percent in after hours trade.

The Columbus, Indiana-based company now expects full-year revenue of about $17 billion, compared to its previous estimate of $18 billion.

Cummins had previously lowered its full-year revenue outlook in July from its previous expectation of 10 percent growth. For the full year 2011, the company generated revenues of $18.05 billion.

Analysts polled by Thomson Reuters currently estimate revenues of $18.13 billion for the full year.

The company also lowered its earnings before interest and taxes, or EBIT, estimate to about 13.5 percent from a prior guidance of 14.25 to 14.75 percent.

Chief Executive Tom Linebarger said, "We continued to see weak economic data in a number of regions during the third quarter increasing the level of uncertainty regarding the direction of the global economy. As a result of the heightened uncertainty, end customers are delaying capital expenditures in a number of markets, lowering demand for our products."

Cummins, based on preliminary results, expects third-quarter revenues of about $4.1 billion and EBIT of around 12 percent. Analysts currently estimate revenues of $4.42 billion for the quarter.

Cummins said it is taking the required actions in the current environment by cutting costs while maintaining investments in key growth programs. In order to reduce costs, the company plans to shutdowns some manufacturing facilities and expects to reduce its workforce between 1000 and 1500 people by the end of the year.

For the second quarter 2012, Cummins had reported net income of $469 million or $2.47 per share on revenues of $4.45 billion.

"Responding quickly and strategically during these challenging economic times will pave the way for Cummins to emerge stronger as a company when markets inevitably rebound," added Linebarger. "Taking these actions now will allow us meet customer needs, maintain strong financial performance and allow us to capitalize on future growth opportunities."

CMI closed Tuesday's trading at $90.84, down $1.30 or 1.41%, on the NYSE. The stock further lost $4.34 or 4.78% in after hours.